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ABC Learning employee reveals disputes with Eddy Groves

ELEANOR HALL: The man responsible for reporting to the stock exchange about the health of what was once Australia's biggest childcare operator was before the Federal Court in Sydney today.

ABC Learning collapsed in September 2008 and its administrators have been questioning the company's directors about how the company was governed and whether they were honest with the company's shareholders.

So far the court has heard from the company's founders Le Neve and Eddy Groves and its former chairwoman.

Today the company's legal counsel and company secretary Matthew Horton was in the witness box.

Di Bain is at the Federal Court and joins us now.

So Di yesterday Eddy Groves accused the company's auditors of misleading him and the company's chairman of deceiving him. Where does Matthew Horton fit into this picture?

DI BAIN: Eleanor Matthew came, Matthew Horton came to ABC Learning from his role at Rio Tinto in February 2008. He was head hunted for the job.

He came at a time when ABC Learning was already a sinking ship. His responsibilities were for compiling board papers, taking minutes and basically keeping on top of the company's legal responsibilities.

ELEANOR HALL: And how did Mr Horton respond to this question of whether the company was honest with its shareholders?

DI BAIN: He said when he joined the company he had a number of disclosures that needed to be given to the ASX already sitting on his desk. He made a presentation to the board about the importance of just continuous disclosure. And that basically means that companies need to tell the Australian Stock Exchange information that could affect the company's share price.

And just now he's being quizzed on one of ABC Learning's acquisitions. ABC had contracted exclusive rights to another company called 123 Careers. It had the exclusive rights to hire casual and full-time staff.

And then ABC Learning decided to enter into a contract to buy the business of 123 Careers. And he didn't agree with this decision. He basically thought that it was a transaction to purchase back a company which you know the ABC had given the rights away to.

And essentially he had a bit of a dispute with Eddy Groves about this. And the chairman along with Mr Horton decided to get a valuation on what ABC Learning was paying for this new business.

ABC Learning decided it was going to pay $90 million for the business but KPMG said it was only worth about $30 million and already between $50 million and $60 million had been handed over to 123 Careers.

ELEANOR HALL: So what did Mr Horton have to say today about the various allegations that have been made against the chairman, against the auditors and against Eddy Groves himself?

DI BAIN: Yeah he hasn't been asked specifically about this but he's described Eddy Groves' style of board meetings. He said Mr Groves would present information usually on the company's financials either verbally or using a white board.

Mr Horton said that the use of a white board isn't the kind of practice he'd use if he was in a role of CEO.

He also talked about the company's chairman at the time, David Ryan. He said Mr Ryan would take the lead in board meetings and was definitely the dominant force on the board.

ELEANOR HALL: And what happened to Matthew Horton himself when ABC Learning collapsed?

DI BAIN: When Eddy and Le Neve Groves left the company, left their roles in September 2008 when the administrators were brought in Mr Horton took a director's position with ABC Learning.

And he's now the CEO of Good Start childcare. Good Start is buying 678 ABC Learning Centres. It's made up of four not-for-profit organisations.

And interestingly Eleanor Mr Horton is the first executive of ABC Learning which has come to court without legal representation. He's not making his evidence privileged so anything he says here today in court can of course be used against him for criminal proceedings down the track.